nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒06‒08
eighteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The Inverted-U Relationship Between Credit Access and Productivity Growth By Philippe Aghion; Antonin Bergeaud; Gilbert Cette; Rémy Lecat; Hélène Maghin
  2. Related variety, recombinant knowledge and regional innovation. Evidence for Sweden, 1991-2010 By Mikhail Martynovich; Josef Taalbi
  3. Innovation catalysts - How multinationals reshape the global geography of innovation By Riccardo Crescenzi; Arnaud Dyèvre; Frank Neffke
  4. Evaluating the impact of public policies on large firms: a synthetic control approach to science-industry transfer policies By Autant-Bernard, C.; Fotso, R.; Massard, N.
  5. Knowledge Transfers from Federally Supported R&D By Link, Albert
  6. Information technologies and entrepreneurship By Julien Hanoteau; Jean‐jacques Rosa
  7. Measuring organisation capital at the firm level: A production function approach By Rammer, Christian; Roth, Felix; Trunschke, Markus
  8. The impact of financial constraints on tradable and non-tradable R&D investments in Portugal By Magalhaes, Manuela
  9. Monetary Policy Uncertainty and Firm Dynamics By Stefano Fasani; Haroon Mumtaz; Lorenza Rossi
  10. Approaches for leveraging small and medium enterprises to improve nutrition: Net-Map assessment of actors and activities in Ghana By Board for International Food and Agricultural Development (BIFAD); International Food Policy Research Institute (IFPRI); Association of Public and Land-Grant Universities (APLU)
  11. Economic modelling to evaluate Smart Specialisation: an analysis on research and innovation targets in Southern Europe By Javier Barberoa; Olga Diukanovaa; Carlo Gianellea; Simone Salottia; Artur Santoalha
  12. Entrepreneurship among Low-, Mid- and High-Income Workers in South America: A Fuzzy-Set Analysis By Velilla, Jorge; Molina, José Alberto; Ortega, Raquel
  13. Firm productivity dynamics and distribution: Evidence for Chile using micro data from administrative tax records By Elías Albagli; Mario Canales; Claudia de la Huerta; Matías Tapia; Juan Marcos Wlasiuk
  14. How do we measure firm performance? A review of issues facing entrepreneurship researchers By Josh Siepel; Marcus Dejardin
  15. Does Goliath Help David? Anchor Firms and Startup Clusters By Rahul R. Gupta
  16. (The Evolution of CEO Compensation in Venture Capital Backed Startups) By (Michael Ewens); (Ramana Nanda); (Christopher Stanton)
  17. Regional trajectories of entrepreneurship: the effect of socialism and transition By Michael Fritsch; Maria Kristalova; Michael Wyrwich
  18. Semi-endogenous versus Schumpeterian growth models: a critical review of the literature and new evidence By Herzer, Dierk

  1. By: Philippe Aghion (Harvard University [Cambridge]); Antonin Bergeaud (PSE - Paris School of Economics); Gilbert Cette (Centre de recherche de la Banque de France - Banque de France, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Rémy Lecat (Centre de recherche de la Banque de France - Banque de France); Hélène Maghin
    Abstract: We identify two counteracting effects of credit access on productivity growth: on the one hand, better access to credit makes it easier for entrepreneurs to innovate; on the other hand, better credit access allows less efficient incumbent firms to remain longer on the market, thereby discouraging entry of new and potentially more efficient innovators. We first develop a simple model of firm dynamics and innovation‐based growth with credit constraints, where the above two counteracting effects generate an inverted‐U relationship between credit access and productivity growth. Then we test our theory on a comprehensive French manufacturing firm‐level dataset. We first show evidence of an inverted‐U relationship between credit constraints and productivity growth when we aggregate our data at the sectoral level. We then move to firm‐level analysis, and show that incumbent firms with easier access to credit experience higher productivity growth, but that they also experience lower exit rates, particularly the least productive firms among them. To support these findings, we exploit the 2012 Eurosystem's Additional Credit Claims programme as a quasi‐experiment that generated an exogenous extra supply of credits for a subset of incumbent firms.
    Keywords: credit constraint,firms,growth,interest rate,productivity
    Date: 2019–01
  2. By: Mikhail Martynovich; Josef Taalbi
    Abstract: This study investigates how related variety in the regional employment mix affects the innovation output of a region. Departing from the idea of recombinant innovation, previous research has argued that related variety enhances regional innovation as inter-industry knowledge spillovers occur more easily between different but cognitively similar industries. This study combines a novel dataset and related variety measures based on network theory, which allows a more nuanced perspective on the relationship between related variety and regional innovation. The principal novelty of the paper lies in employing new data on product innovations commercialised by Swedish manufacturing firms between 1970 and 2013. In this respect, it allows a direct measure of regional innovation output as compared to patent measures, usually employed in similar studies. The second contribution of this paper is that we employ network-topology based measures of related variety that allow us to measure relatedness as the recombination rather than direct flow of knowledge. We argue that this measure comes closer to the notion of innovation as spurred by recombination and show that this measure is a superior predictor of innovation activity.
    Keywords: related variety, relatedness, innovation, network analysis
    JEL: L16 O31 R11 R12
    Date: 2020–03
  3. By: Riccardo Crescenzi; Arnaud Dyèvre; Frank Neffke
    Abstract: We study whether and when Research and Development (R&D) activities by foreign multinationals help in the formation and development of new innovation clusters. Combining information on nearly four decades worth of patents with socio-economic data for regions that cover virtually the entire globe, we use matched difference-in-differences estimation to show that R&D activities by foreign multinationals have a positive causal effect on local innovation rates. This effect is sizeable: foreign research activities help a region climb 14 percentiles in the global innovation ranks within five years. This effect materializes through a combination of knowledge spillovers to domestic firms and the attraction of new foreign firms to the region. However, not all multinationals generate equal benefits. In spite of their advanced technological capabilities, technology leaders generate fewer spillovers than technologically less advanced multinationals. A closer inspection reveals that technology leaders also engage in fewer technological alliances and exchange fewer workers in local labor markets abroad than less advanced firms. Moreover, technology leaders tend to set up their foreign R&D activities in regions with relatively low absorptive capacity. We attribute these differences to that fact that the trade-off between costs and benefits of local spillovers a multinational faces depends on the multinational’s technological sophistication. This illustrates the importance of understanding corporate strategy when analyzing innovation clusters.
    Keywords: innovation, regions, foreign direct investment, patenting, cluster emergence
    JEL: O32 O33 R11 R12
    Date: 2020–03
  4. By: Autant-Bernard, C.; Fotso, R.; Massard, N.
    Abstract: Large firms dominate R&D investment in most countries and receive the majority of public R&D funding. Due to methodological difficulties, however, evaluation of the effect of government-sponsored R&D programmes mainly focuses on small- and medium-sized enterprises. The scarcity of large firms and their heterogeneity hampers the ability to find proper counterfactuals for very large companies and makes it difficult to use proper inference methods to measure the impact of a specific policy. In order to address these methodological issues, we propose using the synthetic control method the synthetic control method, initially developed by Abadie et al. (2010) to evaluate programmes on a regional scale. We apply this method to evaluate the impact of a new French science-industry transfer initiative and compare the results with the random trend model and more standard counterfactual approaches. Based on data covering a long pre-treatment period (1998–2011) and ongoing treatment period (2012–2015), we reveal a convergence between the results obtained with the synthetic control method and the random trend model, and demonstrate that traditional counterfactual evaluation methods are not appropriate for large firms. Moreover, the synthetic control method has the advantage of providing an individual assessment of the policy impact on each firm. In the specific case of the French science-industry transfer initiative, it reveals that the impact on private R&D is highly heterogenous both on RD inputs and cooperation behaviours. Beyond this specific transfer policy, this study suggests that the synthetic control method opens new research perspectives in policy impact evaluation at the firm level.
    JEL: C23 D22 O38
    Date: 2020
  5. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: The purpose of this paper is to identify covariates with publication activity, a form of knowledge transfer, from SBIR publicly funded research. The paper offers an argument about the policy relevance of studying knowledge transfers from publicly funded research that occurs in private sector firms. Relevant explanatory variables are the length of the funded research project, university involvement in the project, the firm's history of SBIR funding, and the academic background of firms' founders.
    Keywords: Technology transfer; Public sector R&D; Entrepreneurship; Program evaluation; SBIR program;
    JEL: H54 L26 O31 O32 O38
    Date: 2020–05–21
  6. By: Julien Hanoteau (KEDGE Business School [Marseille], AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Jean‐jacques Rosa (Institut d'Études Politiques [IEP] - Paris)
    Abstract: This article shows how the increase of information availability due to new technologies positively affects aggregate entrepreneurship in national economies. We rely on an "occupational choice" model of managerial production, extended to include the managerial use of information, to explain variations in the number of entrepreneurs, and thus of firms, as measured by the aggregate new business creation data. We present evidence that supports such a theory of industrial organization dynamics for a sample of 78 economies over the period 2004–2012 using panel data instrumental variable regressions.
    Keywords: Entrepreneurship,Information and communication technologies,Managerial information,Industrial organization
    Date: 2019–01–07
  7. By: Rammer, Christian; Roth, Felix; Trunschke, Markus
    Abstract: Organisation capital is one of the key intangible assets of firms, driving innovation and firm performance. Measuring this asset has been notoriously difficult, however. Differently to other intangible assets, firms do not build up organisation capital primarily by monetary investment but rather through establishing new organisational routines and building up trust, which often do not coincide with any financial expenditure. Quantifying such efforts at the firm level has largely failed so far. This paper takes up a traditional production function approach which includes, in addition to labour and tangible assets, investment in all measurable intangible assets (technological and non-technological knowledge, software and databases, firm-specific human capital, brand equity), but excluding organisation capital. The residuum of the estimation is considered as a measure of a firm' organisation capital. Using panel data from the German innovation survey, we find higher organisation capital in young and small firms. Our measure tends to show a u-shaped link to qualitative indicators such as organisational innovation.
    Keywords: Organisation Capital,Production Function,CIS
    JEL: D24 E22 L25
    Date: 2020
  8. By: Magalhaes, Manuela
    Abstract: We develop a directed technical change model with two sectors, tradable and non-tradable, and dynamic firms’ decisions to invest in R&D in the presence of financial constraints. The model establishes a linkage between R&D decisions, product and process innovations, future productivity, profits, and credit constraints. The model is estimated using Portuguese firms’ data of the tradable and non-tradable sectors. We find that the previous R&D investments raises the innovating probabilities, the innovating probabilities are higher in the tradable sector, and the startup costs of innovation tend to be higher than the maintenance costs. The results also show complementary between the R&D benefits and the firm’s financial strength, diminishing marginal returns to capital on innovation benefits, and high heterogeneity of the innovation costs across industries. Finally, when the firms’ financial strength and the trade-off between tradable and non-tradable goods are considered, the R&D benefits in the non-tradable sector do not compensate its cost given the higher productivity and innovation probabilities of the tradable sector. As a result, the R&D investments in the tradable sector illustrates a misallocation of financial resources.
    Keywords: : Credit constraints, firm-level data, productivity, R&D, tradable and non-tradable goods.
    JEL: O31 O32
    Date: 2020–04–04
  9. By: Stefano Fasani (Queen Mary University); Haroon Mumtaz (Queen Mary University); Lorenza Rossi (University of Pavia)
    Abstract: This paper uses a FAVAR model with external instruments to show that policy uncertainty shocks are recessionary and are associated with an increase in the exit of firms and a decrease in entry and in the stock price with total factor productivity rising in the medium run. To explain this result, we build a medium scale DSGE model featuring firm heterogeneity and endogenous firm entry and exit. These features are crucial in matching the empirical responses. Versions of the model with constant firms or constant firms' exit are unable to re-produce the FAVAR response of firms' entry and exit and suggest a much smaller effect of this shock on real activity.
    Keywords: Monetary policy uncertainty shocks, FAVAR, DSGE.
    JEL: C5 E1 E5 E6
    Date: 2020–05
  10. By: Board for International Food and Agricultural Development (BIFAD); International Food Policy Research Institute (IFPRI); Association of Public and Land-Grant Universities (APLU)
    Abstract: This brief summarizes the findings of a needs assessment and stakeholder mapping exercise conducted under the Food and Agriculture Organization of the United Nations (FAO) initiative “Strengthening capacities for nutrition-sensitive food systems through multi-stakeholder approach.†It includes a review of literature on the role of SMEs in supporting healthy diets, results of a rapid survey to assess SMEs’ needs, and the findings of a stakeholder network analysis.
    Keywords: UNITED STATES; USA; NORTH AMERICA; AMERICAS; youth; governance; migration
    Date: 2019
  11. By: Javier Barberoa (European Commission, Joint Research Centre (JRC), Seville, Spain); Olga Diukanovaa (European Commission, Joint Research Centre (JRC), Seville, Spain); Carlo Gianellea (European Commission, Joint Research Centre (JRC), Seville, Spain); Simone Salottia (European Commission, Joint Research Centre (JRC), Seville, Spain); Artur Santoalha (TIK Centre, University of Oslo, Norway)
    Abstract: We make the case for a technology-enabled approach to Smart Specialisation policy making in order to foster its effectiveness by proposing a novel type of economic impact assessment. We use the RHOMOLO model to gauge empirically the general equilibrium effects implied by the Smart Specialisation logic of intervention as foreseen by the policy makers designing and implementing the European Cohesion policy. More specifically, we simulate the macroeconomic effects of achieving the R&D personnel targets planned by a set of Southern European regions. We discuss the implications of the proposed methodology for future assessments of Smart Specialisation.
    Date: 2020–05
  12. By: Velilla, Jorge (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Ortega, Raquel (University of Zaragoza)
    Abstract: This paper studies the reasons underlying the entrepreneurial decisions of low-, middle-, and high-income workers in South America. Using data from the GEM APS for the period 2005-2017, we apply fuzzy set Qualitative Comparative Analysis, allowing us to find causal links in the form of necessary conditions linked to entrepreneurship in the sample countries. Results show some differences in the conditions that lead individuals to become entrepreneurs, depending on income levels and gender. However, peer effects, the social perception of entrepreneurship, entrepreneurial skills, and formal education seem decisive in different contexts, although they may operate in both complementary and substitutive ways. The same combination of conditions does not appear to work for all the countries, even when taking into account the gender and income level of workers.
    Keywords: South America, entrepreneurship, income, fsQCA, GEM data
    JEL: L26 J22
    Date: 2020–05
  13. By: Elías Albagli; Mario Canales; Claudia de la Huerta; Matías Tapia; Juan Marcos Wlasiuk
    Abstract: Using administrative tax records for all formal Chilean firms, we compute and characterize the evolution and distribution of total factor productivity at the firm level. With data on labor, capital, and value-added, we compute TFPR measures for individual firms between 2006 and 2015, allowing for differences in factor intensities across economic sectors. Our results show that factor reallocation plays a relevant role in explaining the evolution of aggregate TFP in Chile over the last decade. Firms with higher TFPR hire more workers, have stronger capital growth, and have a larger probability of survival. However, the extent of reallocation does not prevent a large, persistent dispersion in TFPR among firms. The magnitude of this dispersion suggests that further reallocation could bring up first-order gains in aggregate productivity and output. Our results also suggest that misallocation comes mainly from distortions on the firms´ overall scale, rather than from distortions on the relative use of capital and labor.
    Date: 2019–05
  14. By: Josh Siepel (SPRU - Science and Technology Policy Research - University of Sussex, University of Sussex [London, UK]); Marcus Dejardin (UCL - Université Catholique de Louvain, Université de Namur [Namur])
    Abstract: This paper aims to provide a succinct overview of the important challenges facing researchers seeking to perform firm level research, along with an overview of the different data sources that may be used, and some techniques that can be employed to ensure that data is robust. An emphasis is put on the linked importance of research design and choice of data. We discuss quantitative data and, more specifically, the measures used to observe firm performance, and present different types of data sources that researchers may use when studying firm level data, i.e. self-report data, official statistics, commercial data, combinations of data, and Big Data. We examine potential problems with data, from measurement to respondent and researcher errors. Finally, some key points and some avenues for future research are briefly reviewed.
    Keywords: Firm Growth,Firm Performance,Methodology,Data Sources,Self-report Data,Official Data,Big Data
    Date: 2020–05–12
  15. By: Rahul R. Gupta
    Abstract: This paper investigates the effects of a large firm’s geographical expansion (anchor firm) on local worker transitions into young firms through wage effects in industries economically proximate to the anchor firm. Using hand-collected data matched to administrative Census microdata, I exploit anchor firms’ site selection processes to employ a difference-in-differences approach to compare workers in winning counties to those in counterfactual counties. The arrival of an anchor firm induces worker reallocation towards young firms in industries linked through input-output channels by a magnitude of 120 new businesses that account for approximately 2,300 jobs. Consistent with the literature in personnel and organizational economics, incumbent firms experiencing the fastest wage growth due to these shocks shed mid-layer employees who select into young firms within the county and in their own industry of experience. These effects are strongest in the most specialized and knowledge-intensive industries. Attracting an anchor firm to a county appears to have limited spillover effects in overall employment that are mainly driven by reorganization of incumbent firms in the anchor’s input-output industries that face rising labor costs.
    Date: 2020–05
  16. By: (Michael Ewens) (California Institute of Technology); (Ramana Nanda) (Harvard Business School, (Entrepreneurial Management) Unit); (Christopher Stanton) (Harvard Business School, (Entrepreneurial Management) Unit)
    Abstract: (We use individual-level data to shed light on the evolution of founder-CEO compensation in venture capital-backed startups. We document that having a tangible, marketable product is a fundamental milestone in CEOs’ compensation contracts, marking the point at which liquid cash compensation begins to increase significantly – well before a liquidity event. “Product market fit” also coincides with key human capital in the startup becoming more replaceable, marking an apparent transition in the firm's lifecycle from ‘differentiation’ to ‘standardization’. Although substantial increases in cash compensation for founder-CEOs in response to milestones improves the certainty equivalent of attempting entrepreneurship relative to flat pay, low cash compensation in the very early years can still deter entrepreneurship for potential entrants. We characterize the types of individuals most likely to be impacted by this constraint and hence those whose ideas are unlikely to be commercialized through VC-backed entrepreneurship.)
    Keywords: (Entrepreneurship, venture capital, executive compensation)
    JEL: G32
  17. By: Michael Fritsch (Friedrich Schiller University Jena and Halle Institute for Economic Research (IWH), Germany); Maria Kristalova (Friedrich Schiller University Jena, Germany); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany)
    Abstract: We investigate how major historical shocks affect regional trajectories of economic activity. To this end, we conduct a comparative analysis of the development of entrepreneurship in East and West Germany after World War II. The introduction of an anti-entrepreneurial socialist economy in East Germany in 1949, and the subsequent transformation to a market economy four decades later were major historical shocks to the economy in general, and to entrepreneurship specifically. Our comparative analysis of East and West Germany assesses how these shocks affected the level of entrepreneurship at the regional level. Surprisingly, our results show that socialism does not have a long-run negative effect on the prevalence of self-employment in East Germany, despite the severe anti- entrepreneurial policies prevalent in Soviet-style socialism. Quite to the contrary, there is actually a positive treatment effect of German separation and reunification. Further analyses suggest that current structural differences in regional levels of self-employment in Germany are not pre- dominantly due to the socialist legacy of the East, but mainly a result of the shock transformation that occurred with reunification.
    Keywords: Entrepreneurship, self-employment, transition, socialism, regional development, GDR
    JEL: L26 R11 N94 P25
    Date: 2020–06–02
  18. By: Herzer, Dierk
    Abstract: Several studies have tested semi-endogenous versus Schumpeterian growth models using different methodological approaches. This paper critically reviews these studies including their approaches and provides new evidence on this issue, by analyzing both time-series data from the United States and panel data from 19 OECD countries over the period 1980-2014. The review finds much support for Schumpeterian growth theory, but shows that all studies reviewed have several limitations, including conceptual problems associated with the use of the number/stock of patents as a measure of the flow/stock of knowledge, the possibility of spurious regressions due to non-stationary data, potential mismeasurement of R&D inputs due to possible interpolation and deflation errors, misspecification problems that can arise in difference models when variables are cointegrated, and potential spurious rejections of the unit root hypothesis for R&D intensity when the lag length in unit root tests is too small. The present study avoids these limitations and finds strong evidence in favor of semi-endogenous growth.
    Keywords: semi-endogenous growth models, Schumpeterian growth models, R&D, TFP, unit roots, cointegration
    JEL: O30 O40
    Date: 2020–05

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